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Ed's Blog

The industry trade press (unfortunately, its remarks are mostly behind paywalls) is all a-flutter with various demands from lobbyists that when Consumer Financial Protection Bureau (CFPB) Deputy Director Raj Date leaves on January 31, as he has announced, that he be replaced with what they characterize as "another" bank-friendly regulator. Raj Date (2010 bio) wasn't selected as CFPB special advisor and then deputy director because he was "bank-friendly" or because he had a banking background; he was selected by Professor Elizabeth Warren and Treasury Secretary Tim Geithner because his entire background, including his additional consumer background, made him qualified to become CFPB director if its director left. His replacement needs to have the same pro-consumer qualifications. Nothing in the law degrades the position of Deputy Director to merely "someone approved by the banks."

Some of those whispers may be coming from candidates who may be simply self-promoting themselves, which is engaging in a common but not so harmless Washington game. In doing so, they serve the goal of powerful special interests, which is to create a false narrative or atmospheric intended to end up with one answer -- that the CFPB's deputy director spot is reserved for an industry player. Why? In particular they claim, to "balance out" against CFPB's "extreme" pro-consumer bent.

The CFPB does not have any sort of extreme pro-consumer bent. Quite simply, it is charged by the Congress and its enabling legislation to make financial markets work more effectively and fairly for consumers. Most industry lobbyists, who grew up in a town where federal bank regulators sometimes did exist to serve industry, not the public interest, don't like consumers having their own regulator at the table. They'd prefer to go back to the days of little or no regulation, which ended in 2008 with the spectacular implosion of our financial system and then our economy.

The CFPB was established as a consumer protection agency in response to that implosion-- the biggest financial crisis this country has faced since 1929.

The deputy director plays an important role at the CFPB, and would by law serve as acting director in the event of the director's absence or resignation. This means that the deputy director cannot have an industry bias, but must be qualified to protect consumers against dangerous or unfair practices in the financial markets.

Raj Date certainly had industry experience but he also had consumer experience. He founded and ran the non-profit Cambridge Winter Center, which developed policy supportive of the need for a CFPB before the CFPB was established. He sat on the board of Demos, a think tank that is a member of the PIRG-backed Americans for Financial Reform. He then was hand-picked by Professor Elizabeth Warren to help her set the agency up.

His management experience is replicable at other financial agencies or at large non-profits or other governmental units, such as state banking departments or attorneys' general offices (where Director Richard Cordray came from). It does not need to come from industry.

The financial industry already has plenty of voices and plenty of money to influence policy. The #2 seat at the CFPB should not and cannot be one of those voices. Selection of a new deputy director cannot be based on any balancing act or compromise. It cannot be a person agreeable to "both sides." The person selected must be qualified to become the director of the first federal financial agency with only one job: protecting consumers. The next CFPB deputy director cannot have an industry bias. After all, the CFPB was established as a remedial reform because the previous bank regulators did have an industry bias.